International Econ 2

International Econ 2 - Chapter 9 Economic Integration Free...

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Chapter 9 Economic Integration Free trade protectionism (restricted trade) trade liberalization bilateral, trilateral, and multilateral trade Negotiation: Profilferation of RTAs (regional trade agreements) Stages of Economic Integration -from narrow to deep integration PTA preferential trade agreement FTA free trade agreement CU Customs Union CM Common Market -Economic Union monetary Union (common central bank, common monetary policies, common currency) -Static Effects vs Dynamic Effects of FTA or CU Static Effects (Trade creation vs. Trade diversion effects) Dynamic effects (Size, economies of scale, degree of competition, technology transfer, and learning by doing) Trade diversion: diversion of trade from nonmembers to members caused by discrimination Trade creation: trade liberalization element of integration -if trade creation dominates, welfare increases -if trade diversion exceeds trade creation, welfare is reduced Section 201: escape clause that allows the US to abandon its tariff-reduction obligations
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International Econ 2 - Chapter 9 Economic Integration Free...

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